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Anticipating Market Turns - strong and some were weak Some...

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Anticipating Market Turns Brett N. Steenbarger, Ph.D. www.brettsteenbarger.com Note: The following is an excerpt from Gail Osten’s interview with Brett Steenbarger in the March, 2003 issue of Stock, Futures, and Options (SFO) magazine entitled “The Windmills of Your Mind and the Pathway to Your Trades”. The entire interview can be accessed at www.sfomag.com . Gail Osten : …Too often, people give generalities, but they really want to know how these strategies are put together. At this point, I think your daughter’s fish story might be appropriate. Brett Steenbarger : This came out in a posting that I did for Laurel Kenner and Victor Niederhoffer’s Speculators column, which is on the MSN Money site. They requested ideas about trading and indicators for trading. My daughter Devon, who was about 10 years old at the time, came up with this idea with me. We were examining stocks in the basket of 40 issues that I [follow], and she had the idea that some of the stocks were
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Unformatted text preview: strong, and some were weak. Some of the stocks were going in one direction, and the others weren’t. It was her view that the stocks were like schools of fish and that ones that are strongest are the “lead fish”. So if you want to know what direction the market is going in, you had to look at the lead fish—in other words, the stocks that were leading. Since then, it’s turned out to be a helpful, qualitative insight. Sometimes the market will be going down and down and down, but you’ll notice one or two or three stocks are refusing to continue to go down, and they’re actually starting to bubble up. Those are the candidates as lead fish, and it makes sense to follow those stocks. It makes sense to think about a turn around in the broader market as more of the individual issues follow those lead fish....
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